CREDIT OPEN: EU and Italy set to boost volumes, gold shining bright
EU stocks look set for a neutral open as markets absorb the latest earnings salvo and also overnight developments which saw President Trump confirm that 25% tariffs on steel and aluminium imports will begin in March and warned of further levies to come.
The threat of escalating trade tensions continues to be great news for gold bugs with the spot price jumping to a fresh record high above USD2,942 in Asian hours, leaving bulls targeting the psychological 3k level perhaps as soon as today. See here for more from our Asian team.
That evident haven demand looks increasingly hard to square with the ever-loftier levels being occupied by various risk assets and also key equity indices where we note that the Stoxx600 hit yet another all-time high on Monday. One gets the sense that something will have to give before too long, the question being what?
If the reception to recent to recent deals is any guide, that “something” is probably not high-grade European credit though where plentiful demand continues to deliver cost-effective funding for issuers compared to existing curves (see Monday’s DAILY CLOSE for more).
So what could upset the apple cart today? Well, it’s unlikely to be data related given that the session delivers little in the way of economic updates to move the needle.
Speakers are plentiful though including BoE chief Bailey and also Fed’s Powell who begins two days of testimony in Congress.
Supply is also a key focus in Europe and comes from Netherlands and Germany that will compete with today’s syndicated sales from Italy and the EU. Stateside, a 3yr UST sale kicks off the latest US supply cycle, ahead of which, cash UST were shuttered during Asian hours for the Japanese holiday while US T-note futures have edged a little lower.
For more on latest developments see the European Breakfast Briefing.
Tuesday’s expected supply
It was a fast start to the new week as Monday saw no fewer than 12 names across all IG asset classes decide to raise euro funding on the day. The final haul came in at EUR13.3bn via 16 separate lines, kicking off a week that is expected to yield an average EUR52bn of euro paper according to our issuance poll conducted last Friday. We look set to get a lot closer to that on Tuesday with SSA heavyweights Italy and European Union amongst several issuers already prepping offers as detailed in the pipeline below.
** EU EUR Dec 2031 vanilla and 3.25% Feb 2050 green taps
** Italy EUR Oct 2040 BTP
** Albania EUR 10yr
** Dexia EUR Apr 2028s
** UK GBP Mar 2035 conventional gilt
** Investec EUR500m no grow 6NC5 HoldCo senior
** Sparebanken Soer Boligkreditt AS EUR500m no grow 6yr green covered
** TSB Bank EUR 5yr covered
We may not have gotten as many issuers as expected (6) tapping the US high-grade primary market Monday, but what we lacked in numbers was more than made up for in volume. Subsequently, and surprisingly, since broader market conditions appeared favourable, only three issuers decided to put their best foot forward to start off the week’s action, a week that is expected to produce on average USD35bn in new ex-SSA supply. Of those three, one was an anticipated M&A-related transaction from Eli Lilly who is using the proceeds from its USD6.5bn 6-part offering to fund its USD2.5bn acquisition of Scorpion Therapeutics’ PI3Kα inhibitor program announced last month. For more colour see THE ENDGAME.
What to watch today
** Key Data: US Jan NFIB Small Business Optimism (11:00)
** Key Events: BoE’s Bailey (12:15), Fed’s Hammack (13:50), Powell (15:00), Williams (10:30) and Bowman (10:30) as well as ECB’s Schnabel (17:00) all speak
** Auctions: NE to sell up to EUR2bn 2047 Bonds (09:00), GE to sell EUR5bn 2030 Bobls (10:30) and US to sell USD58bn 3yr Notes (18:00)
** Earnings: 13 Stoxx600 & 16 S&P500 companies report
All times GMT
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